Northwest Film Ad Service, Inc

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IN THE MATI'ER OF NORTHWEST FILM AD SERVICE, INC., AND FRANK D. ATKINS COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. II 01•' AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Doclcet ~001. Compla-int, Feb. 1, 1910-Decision, Feb. fO, 1913 Where a corpol·ation and its president, engagetl in the competitive interstate s&le and distribution of an advertising film service which consisted of advertising films displaying such nationally advertised articles as automobiles, refrigerators. washing machines, and automobile tires, to which were attached advertising trailers with the name and address of the purchaser of the film set·vice and such other information as purchaser might request; contracting with retailers to deliver films advertising the dealer's products to theaters named for a specified price, and dealer agreeing to purchase from· them a moving picture tt·ailer containing his name, address and other advertfsing material- (a) Represented that corporation in question was t.he producer of said films and' trailers, and that their business was nation-wide in scope, placing upon, various orders and advertising material such notations as "General Offices 505 Guardian Eldg., Portland, Oregon" and ''Offices in Portland, New 01·leans, Chicago, Cleveland, Kansas City, New York, Dallas, Minneapolis"; When in fact they were not engaged lu the prpcluctlon of any film, but solely in the distribution of films produced by a Kansas City concern, and they had no branch office or any place of business other than that In Portland, Oreg. ;

(1'1)' Represented that they had made arrangements with varlot:!S automobller refrigerator, washing-machine, and tire manufacturers or distributors to co-operate with purchasers of their advertising film service, and to pay a portion of t11e cost thereof;

The facts being no such agreement had been entered into and they were not authorized to make any such representations; and (o) Falsely represented, In some cases, that they would not solicit or sell any competitive dealer, notwithstanding fact they did so, and supplied advertising films covering competitive products; With effect of misleading and deceiving a substantial portion of the purchasing public Into the mistaken belief that such representations were true and Into purchase of said film service; whereby trade was diverted unfairly to them from competitors:

Held, That such acts and practices, under the circumstances set forth, were all to the prejudice and Injury of the public and competitors, and constituted unfair methods of competition In commerce and unfair and deceptive acts and practices therein.

Before Mr. Lewis 0. Russell, trial examiner. Mr. Carrel F. Rhodes and Mr. B. G. Wilson for the Commission. Complaint 36 I!'. T. C. Complaint Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said act, the Federal Trade Commission, having reason to believe that Northwest Film Ad Service, Inc., a corporation, and Frank D. Atkins, an individual, hereinafter referred to as respondents, have violated the provisions of the said act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows: PARAGRAPH 1. The respondent, Northwest Film Ad Service, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Oregon, with its office located at 274G Northeast Twenty-fifth Avenue in the city of Portland, Oreg.

The respondent, Frank D. Atkins, an individual, is president of the aforesaid corporate respondent, and formulates, controls, and directs the policies of the corporate respondent. The respondents · have acted in conjunction and cooperation with each other in carrying out the acts and practices hereinafter set forth. PAR. 2. The respondents are now, and for some time last past have been, engaged in the sale and distribution of advertising films and moving picture trailers. They cause such films and trailers, when r::old, to be transported from their aforesaid place of business in the -State of Oregon to the purchasers thereof located in various other States of the United States, and in the District of Columbia.. Respondents maintain, and at all times mentioned herein, have maintained, a course of trade in said films and trailers in commerce among and between the various Stutes of the United States, and in the District of Columbia.

PAn. 3. The resrlOndents are now, and during all the times mentioned herein have b<•en, in Fmbstantial competition with other corporations, and with firms, partnerships, and individuals also engaged in the sale and distribution of advertising films lleld moving picture trailers in commerce among an<l both£'en the various States of the United States, and in the District of Columbia. PAn. 4. In the course nnd conduct of their aforesaid business, and for the purpose of inducing the purchase of their advertising films and tmilers, the rpspondents have made, and are now making, false and mislead1ling statements nnd representations concerning such films and trailers, as well ns false and misl£'uding statements and representations concerning similar products ~old and distributed by their -competitors.

I' I NORTHWEST FILM AD SERVICE, INC., ET AL. 2Q!) 207 Complaint Among and typical of such false and misleading statements and t·epresentations made by the respondents arc the following: 1. That the respondents are producers of advertising films and trailers us well as distributors;

2. That the respondents' business is Nation-wide in its scope, and that respondents maintain offices in numProns cities throughout the United States;

3. That the respondents have contacted the manufacturers or distributors of various products sold by the prospective purrhasPr, and that such manufacturers or distributors have agreed to cooperate with such prospective purchaser in the film advertising o~ their respective products, and will pay a portion of the cost of such advertising; and that the prospective purchaser is being contacted by respondents at the instance of the manufacturer or distributor; 4. That the respondents have negotiated contracts with the local theaters to show their advertising films and trailers; 5. That the respondents are agents of certain of their competitors, and have been authorized to renew contracts existing between the prospective purchaser and such competitors; 6. That the advertising film supplied by the respon<lents will be of the kind and quality designated by the purchaser; 7. That. if the prospective purchaser will purchase their advertising film respondents will not solicit the competitors of such purchaser; 8. That certain of re:-<pondents' competitors are out of business. !'An. 5. The foregoing representations are false and misleading. In truth and in fact the respondents are not producers of films of any kind, but are distributors only. The respondents' business is not Nation-wide in scope, but is confined largely to the States of Oregon, 'Vashington, and California. Respondrnts maintain no offices other than their office in the city of Portland, Oreg. Respondents do not contact the mnnufacturrrs or <listributors of any products with re- Bpect to enlisting the cooperation of such manufacturers or distributors in such film advertising, or with re!'pect to obtaining an agreement from such manufacturers or distributors to pay a portion of the cost of such advertisi11g. The contacts made by respondents with prospective purchasers nre not made at the instance of such manufacturers or distributors, but are made wholly upon the initiative of respon<lent.<;, and without the knowledge of such manufacturers and distributors. In many instances the respond«.>nts do not negotiate contracts with local theaters for the showing of such films. The respondents are not the agents of any of their competitors norarc the l'P."pomlents authorizrtl by such compt'titors to renew contracts existing between the prospective purchasers and such competitors. In 210 FEDERAL TRADE CO.Ml\HSSION DECISIONS Findings 3GF.T.O.

many instances the film actually supplied· the purchaser by the re· spondents is not of the kind and quality specified by the purchaser, but is of a different kind, and is usually o£ an inferior quality. The respondents do not confine their sales o£ films to one purchaser in a particular line o£ business, but proceed to solicit the purchase o£ such films from other persons and business concerns engaged in the same line of business as the original purchaser. In many instances the competitors represented by respondents as being out of business are not in fact out of business, but are conducting their respective businesses in regular course.

PAR. 6. The use by respondents of the aforesaid false and mislead· ing statements and represmtations has had, and now has, the tendency and capacity to, and does, mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that said statements and rPprrsentations are true, and into the purchase of a substantial quantity of respondents' advertising films and trailers. As a result, trade is diverted unfairly to respondents from their com~ petitors, and thereby substantial injury has been done, and· is being done, to competition in commerce among and ~etween the several States of the United States, and in the District of Columbia. PAR. 7. The aforesaid acts and practices of the respondents as herein alleged are all to the prejudice and injury of the public .and of re· spondents' competitors, and constitute unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. , l TIEPOnT, FINDINGS AS TO TIIE FACTs, ANI> Onder Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on February 1, lho, issued and sub· sequently served its complaint in this proceeding upon the respondents, Northwest Film Au Service, Inc., a corporation, and Frank D. Atkins, an individual, charging them with the use of unfair methods of competition in commerce and unfair and deceptive nets and practices in commerce in violation of the provisions of said act. After the issu· ance of said complaint and the filing of respondent's answer thereto, testimony and other evidence in support of, and in opposition to, the allegations of said complaint were introduced before trial examiners of the Commission theretofore duly designate<! by it, and said testimony and other evidence were duly recorded anu filed in the office of the Commission. Thereafter this proceeding regularly came on for final hearing before the Commission upon said complaint, answer thereto, testimony and other evidence, report of Trial Examiner Lewis NORTHWEST FILM AD SERVICE, INC., ET AL. 211 207 Findings -<J. Russell upon the evidence, and brief in support of the co~plaint (no brief having been filed by the respondents or oral argument requested) ; . .and the Commission, having duly considered the matter and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its con- -clusion drawn therefrom.

FINDINGS AS TO Tile FACTS PARAGRAPH 1. Respondent, N <:>rthwest Film Ad Service, Inc., is a ·corporation organized, existing, and doing business under and by virtue of the laws·of the State of Oregon, with its principal office located at 505 Guardian Building in the city of Portland, Oreg. Respondent, Frank D. Atkins, is an individual, and president of the respondent, Northwest Film Ad Service, In~., and formulates, controls, and directs the policy of s·aid corporate respondent. The re:. :md practices hereinafter described .. inRpondentscarryinghaveout therlctednetsin conjunction and cooperation with each other PAR. 2. The respop.dents are now, and for some time last past have been engaged in the sale· arid distribution of various advertising filin services and moving picture trttilers .. The advertising film service sold by respondents, consisted ·of advertising films usually displaying nationally advertised articles, such as automobiles, refrigerators, llendi~ washing machines, and Goodyear tires:· To these films were attached specially produced advertising trailers, with the name and addr£-.s's of the purchaser and such other adv~rtising information as the purchaser might request. During the period from September 1937 to October 1938 the respondents were distributors of advertising films and moving-picture trailers produced by the United Film Ad Service, Inc., of Kansas City, Mo.

PAn. 3. In the course and conduct of their business, the respondents rnterPd into contracts with retail dealers to deliver films advertising products sold. by such d<>al<>rs, to theaters named in such contracts, for a specified price usually payable in instalments, and, in addition, the retail dealer ngt·e<>d to purchase from the respondents ·a moving-picture tmiler containing the name, address, and other adver~ tising material of such dealer. · Respondents caused such moving~ picture trailers, when sold, and such advertising films, when contracted for flCteeningo, to be transported to the dealer or the theater 1lesignated by him, located in various States of the United States other than the State of Oregon or other than the State in which such films and trailers were produced. Respondents maintain, and 11t all times mentioned herein have maintained, a course of trade in Findings 361!,. T. C. said films and trailers in commerce among and between the various States of the United States.

PAn. 4. Respondents are now, and during all the times mentioned herein have been, in substanlial competition with other corporations and with firms, partnerships, and individuals also engaged in the sale and distribution of advertising film services and moving-picture trailers in commerce among and between the various States of the United States.

PAn. 5. In connection with the sale and distribution of said advertising films and moving-picture trailers, the respondents represented that the respondent, Northwest Film Ad Service, Inc., was the producer of said advertising films and trailers, as well as the distributor thereof, and that the respondents' business was Nation-wide in scope. In this connection the respondents placed upon various orders and advertising material the notations "General Offices, 505 Guardian Dldg., Portland, Oregon" and "Offices in Portland, New Orleans, Chicago, Cleveland, Kansas City, New York, Dallas, Minneapolis," by which means respondents represented that the respondent, Northwest Film Ad Service, Inc., was a corporation with its general offices located at Portland, Oreg., and with branch offices located in the various cities named. In fact, the respondents were not engaged in the production of any films but were engaged solely in the distribution of films produced by the United Film Ad Service, Inc., of Kansas City, :Mo., and said respondents did not at any time have branch offices located in any of the cities named or any office or place of business other than that located in Portland, Oreg. PAR. 6. For the purpose of inducing the purchase of the advertising film service and moving-picture trailers distributed by the respondents, the respondents represented that they had made arrangements with various automobile, refrigerator, washing-machine, and tire mn.nufacturers or distributors to cooperate with purchasers of respondents' advertising film service and trailers advertising their z·espective products and to pay a portion of the cost of such advertising. In fact, no manufacturer or distributor had entered into any agreement with the respondents to participate in any advertising sold by the respondents to their respective dealers, and the respondents were not authorized to represent that any manufacturer or distributor would pay any portion of the dealer's cost of respondents~' advertisin~ film srrvice or trailers.

PAR. 7. In some cases the respondents have induced the purchase of their advertising film service and moving picture trailers by falsely rrpresenting that they would not solicit or sell any competitive dealer, NORTHWEST Film AD SERVICE, INC., ET AL. 213 207 Order when in fact the respondents did solicit and sell such competitive dealers and supply advertising films covering competitive products. PAR. 8. The use by the respondents of the aforesaid false and mis~ leading statements and representations has had, and now has, the tendency and capacity to, and does, mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that such statements and representations are true and into the purchase of respondents' advertising film service and moving picture trailers. As a result, trade has been diverted unfairly to the respondents from their competitors who are likewise engaged in the sale and distribution of advertising film services and moving picture trailers in commerca among and between the various States of the United States.

CONCLUSION The aforesaid acts and practices of the respondents as herein found are all to the prejudice and injury of the public and of respondents' competitors and constitute unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. ORDER TO CEASE AND DESIST This proceeding having l:reen heard by the Federal Trade Commission upon the complaint of the Commission, answer of the respondents, testimony and other evidence· in support of, and in opposition to, the allegations of the complaint taken before trial examiners of the Commission theretofore duly designated by it, report of Trial Examiner Lewis C. Russell upon the evidence, and brief filed by counsel for the Commission; and the Commission having made its findings as to the facts and its conclusion that said respondents have violated the provisions of the Federal Trade Commission Act. It is ordered, That the respondents, Northwest Film Ad Service, Inc., a corporation, and its officers, and Frank D. Atkins, an indi~ vidual, and their respective representatives, agents, and employees, directly or through any corporate or other device in connection with the offering for sale, sale, and distribution of advertising film service or moving picture trailers in commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Representing that the respondents are producers of advertising films and moving picture trailers or that the respondents have branch offices or places of business in any city or State where no such branch office or place of business is operated or maintained. 214 FEDERAL TRADE COMMISSION DEClSIONS Ordet· 3GF. T .. c;

2; Representing directly or by implication that ·any manufacturert distributor, or other person will pay any portion of the cost of any advertising film service or moving picture trailer unless directly authorized by such mnnufacturer, distributor, or other person to make such represen~ations.

3. Representing directly or by implication that respondents will not sell competitors of any purchaser of respondents' advertising film service or moving picture trailers unless respondents refrain from . such sale.

It is fu?·ther ordered, That the respondents shallj within 60 days after service upon them of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which they have complied with this order. . · ' ..' PERGANIOE I~STITUTE 215 Syllabus